SINGAPORE (May 8): Developer Far East Orchard saw its earnings plunge 73.5% to $0.9 million for 1QFY2020 ended March from $3.4 million last year.
Apart from currency translation losses of $11.2 million due to the weakening of Australian Dollar against the Singapore Dollar, the group highlights the adverse impact of the Covid-19 pandemic on its operations.
The decline in earnings was, however, offset by higher profit contribution from the group’s expanded purpose-built student accommodation (PBSA) portfolio in the UK, as well as recognition of share of profit from its joint venture development project Woods Square.
Sales for the quarter, however, increased 2.4% to $38.9 million from $38.0 million a year ago due to higher sales from the group’s PBSA portfolio, but was partially offset by its hospitality business.
Far East Orchard’s hospitality business in its major markets such as Singapore, Australia and Germany booked double-digit declines in revenue per available room (RevPAR) of 33.7%, 19.0% and 23.9% respectively amid widespread border closures and national lockdowns across the world.
The group says that the extent of the decline in RevPAR in Australia and Germany was lower than Singapore as the occupancy in these two countries only started to plunge from March onwards.
The decline in occupancy in Singapore was also mitigated by demand from local companies for
accommodation for their Malaysian workers due to the Malaysia's movement control order, and
from returning Singaporeans from overseas who served their Stay-Home Notices in hotels.
Elsewhere in the UK, the group’s PBSA portfolio of 11 properties were plagued by early cancellations as universities have adopted remote teaching and either cancelled or suspended on-campus activities since Mar 23.
Far East Orchard says these cancellations are expected to impact its revenue by £3 million ($5.2 million).
As at end-March, cash and cash balances for the group stood at $246 million.
While the near-term outlook for the hospitality industry remains bleak, Far East Orchard’s CEO Alan Tang says the board will be tabling its previously announced recommendation for a first and final one-tier tax exempt dividend of six cents per ordinary share for FY2019 for shareholders’ approval at the forthcoming annual general meeting.
The date of the meeting will be announced at a later date, adds Tang.
Although the group is expecting its FY2020 results to be “severely impacted” as the pandemic rages on, it remains confident about the long-term prospects of the hospitality industry and PBSA business.
“The extent of Covid-19 impact on the financial performance remains challenging to assess at this juncture,” says Tang.
“We would like to assure our shareholders that we will continue to do our best in navigating this downturn and will provide timely updates on any material development,” he adds.
Shares in Far East Orchard closed 0.5 cent lower, or 0.5% down, at 99 cents on Friday prior to the results announcement.
